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Corporate Bankruptcies in Germany

Recovery Rates in Insolvency Plans

Flaig, Barbara

Studienreihe der Stiftung Kreditwirtschaft an der Universität Hohenheim, Vol. 55


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German corporate bankruptcies are rarely investigated in economic literature. One main reason is the lack of available data. Furthermore, data quality is quite often poor. Thus, despite the high economic relevance, it is very difficult to explore the division of value in corporate bankruptcies or efficiency effects of insolvency law. This study provides a deeper insight into the economics of corporate reorganizations. Theoretical models that were mainly developed for the US legislation are discussed against the background of German bankruptcy law. By analyzing a unique data set of formal reorganization procedures in Germany between 1999 and 2012, the study identifies factors that influence the extent of recovery rates.

Table of Contents

Section Title Page Action Price
Table of Contents 5
Tables 7
Figures 9
Abbreviations 11
I Introduction 13
II Efficiency of Insolvency Laws 15
II.1 Ex-post Efficiency 15
II.1.a Incentives of Stakeholders in Bankruptcy 15
II.1.b Solving Ex-post Inefficiencies 17
II.2 Ex-ante Efficiency 22
III Overview of the German and the US Insolvency Law 29
III.1 German Procedure 29
III.2 US Procedure 33
III.3 Legal Differences between Germany and the US 34
IV Empirical Evidence for Corporate Bankruptcies 37
IV.1 Extent of Recovery Rates 37
IV.2 Influencing Factors on Recovery Rates 40
IV.2.a Firm Recovery Rates 40
IV.2.a.1 Overview 40
IV.2.a.2 Firm Characteristics 42
IV.2.a.3 Procedural Characteristics 50
IV.2.a.4 Macroeconomic Variables 54
IV.2.b Secured and Unsecured Recovery Rates 56
IV.2.c Bank Recovery Rates 65
IV.2.d Summary 74
IV.3 Evidence for Germany 75
V Analysis of German Reorganization Procedures 79
V.1 Research Design 79
V.1.a Data Acquisition 79
V.1.b Data Cleansing and Definition of Variables 80
V.1.b.1 Firm-specific, Procedural and Macroeconomic Variables 81
V.1.b.2 Recovery Rates 85
V.2 Data Analysis 87
V.2.a Descriptive Statistics 87
V.2.a.1 Firm Characteristics 87
V.2.a.2 Procedural Characteristics 101
V.2.a.3 Distribution of Recovery Rates 105
V.2.b Influencing Factors on Firm Recovery Rates 109
V.2.b.1 Hypotheses 109
V.2.b.2 Methodology 111
V.2.b.3 Correlation Analyses 115
V.2.b.4 OLS Regressions 117
VI Conclusion 125
References 129